Sunday, November 13, 2011

A proposal for Greg Mankiw's Economics 10 course

First, let me say that I think it's a tad silly to walk out of a survey course because you think it's biased and incomplete, before you actually complete the survey course. How are you supposed to know what's left out before you know what's been put in? And how are you going to recognize bias without being well enough grounded in the field's methodologies that you can critically evaluate the ideas that the class left out? The fact is, Greg Mankiw's Principles of Economics is far to the "left" of the econ profession itself; it teaches Keynes but not RBC, and gives "supply-side economics" the half-page dismissal it deserves. If the kids who walked out of Greg Mankiw's introductory economics course had stayed til the end, they might have realized this.

That said, I do sort of sympathize with one point made by the kids. In their open letter, they say:

A legitimate academic study of economics must include a critical discussion of both the benefits and flaws of different economic simplifying models. As your class does not include primary sources and rarely features articles from academic journals, we have very little access to alternative approaches to economics.

This rings true to me. Economics is not physics or biology; there are very few modeling approaches that we really know work. Most of the time, we are still groping around in the dark, relying on our intuition, and taking clumsy stabs at first-pass models. For an upper-level textbook, this is just unwritten and understood; grad students, or even upper-level undergrads, understand that while what they're reading may be written in highly formal math-ese, it usually represents merely the stylized description of an idea that may at some point in the future prove useful for understanding the economy.

An intro textbook is different. Part of the job of an intro or survey textbook is to convey the state of the field to people who will probably not spend their lives as researchers in that field. Intro physics textbooks present Newton's laws in part because those laws work really really well, and thus provide a convincing demonstration of what physics can do. But an introductory economics textbook presents things like the the AD-AS model, the Solow growth model, or the Keynesian cross - models that seem reasonable to our intuition, and for which there is some supporting evidence, but which come with much wider bands of "model uncertainty" due to our inability to test the macroeconomy in a lab. These are the best we've got, but they're no Newton's laws.

So I think an introductory econ textbook should work to convey that uncertainty. I've read every word of (an older edition of) Mankiw's Principles of Economics, and I've taught from the book as well. And while it does a great job of presenting the standard macro (and micro) models in simple and usable forms, it doesn't say as much as I'd like about the massive degree of doubt and ignorance that surround even these bedrock models (actually, I'm not sure what intro textbook does).

Greg Mankiw himself is certainly aware of the uncertain state of macro. In an article earlier this year, he wrote:

After more than a quarter-century as a professional economist, I have a confession to make: There is a lot I don’t know about the economy. Indeed, the area of economics where I have devoted most of my energy and attention — the ups and downs of the business cycle — is where I find myself most often confronting important questions without obvious answers.

I think this idea should be front and center in any introductory economics textbook. If we don't stand up and admit how little we know, plenty of tomorrow's businessmen and lawyers and professionals are going to graduate thinking that the macroeconomists have got it covered. And that could translate into false certainty in political debates, or even in business decision-making.

So anyway, here is my suggestion for Greg Mankiw's Economics 10 course: He should assign students each to report on one theory or technique that they believe is not covered in sufficient depth in the textbook, and to give a presentation on this topic. That would A) convey something about the diversity of ideas out there, as students have demanded, B) give students practice in seeking out and evaluating ideas, and C) make apparent the limitations of class walk-outs as a tool for widening the discussion.

While it's hard to argue with the spirit of this post, I think the complaint is pretty clearly with the point estimates of Mankiw's approach, and not just the confidence bands.

I mean, a downward-sloping AD curve is not just a rough approximation that needs some caveats, it's a completely false description of the effects of deflation in the real world. There is no modern economy in which an important, let alone the main, effect of a falling price level on aggregate demand is to raise it via the real balance effect.

As for the Solow model, it's abstract formalism with no economic content. It abstracts from all the important determinants of economic growth.

More generally, the use of representative agent models is not just an approximation, it's a deceptive attempt to derive welfare conclusions from models that can't provide them. They exists to stack the deck in favor of a conclusion that certain outcomes are somehow optimal.

It's not enough for you guys to be a little more humble. You need to throw out most of what you're doing and start from scratch (or at least from the status quo of 1978.)

I have not read the Mankiw book, nor seen his syllabus. But I took Ec 10 in 1993 from Martin Feldstein, and I was shocked (even then) by the constant stream of simplistic stories we were fed. Two examples:

1. A minimum wage is bad (does Mankiw look at Krueger & Card?)

2. Free trade always good (Does Mankiw admit how well China's mercantilist strategy is working for it? Why not include Dani Rodrik's debunking of Milton Friedman's "pencil" story?)

So what's the cure?

I'd establish several sections in the course based on student interests. Have a "Real World Economics Review" section for the skeptics. Let others focus on environmental economics. Invite the pre-meds to read about the bizarre world of health economics. (They could start with Geoffrey Hodgson (on need) and Uwe Reinhardt ("Chaos Behind a Veil of Secrecy")). Have a pre-law section focus on innovation incentives, looking at patents, copyrights, and trade secrets.

The arrogance you rightly critique in this post boils down to unfounded confidence that some common set of mathematical tools could comprehend these diverse areas of human endeavor.

I like your proposal for an honors seminar, but I understand Ec 10 to an intro principles class with lots of students. Maybe it would be wise to remind everyone economics is a "social science"...economics cannot currently appeal to physical laws. The closest we have in "standard" economics is rationality and expected utility theory, but these still rely on behavioral (social) assumptions. PS. I agree they should have stayed in class and asked their questions.

"The closest we have in "standard" economics is rationality and expected utility theory, but these still rely on behavioral (social) assumptions"...which have been proven to be comprehensively false; they're not even approximations to mob behavior, they're just *wrong*. That would be an intro which wasn't very useful.

Agreed the walk out is sad, but I am not totally unsympathetic. One of the top reasons I didn't study econ, or even consider it, is Mankiw's treatment of "risk compensation" of seatbelts in this intro text. Seatbelts laws causing an increase in accidents is hardly God given fact. Many studies conclude that it doesn't. However, as I remember it, Mankiw's text doesn't really mention that.

When I tried to argue with professors about it, they would give the old economist line 'well you are not thinking objectively. Only economist are trained to think objectively." Economist do that a lot. Proof by Tenure is not part of the scientific method. Sorry. It is all the more troublesome when you try to also theorize that all market players are rational.

I wouldn't have been among the students walking out of the class. But I agree that teachers of intro courses need to devote some time to caveats about the discipline. People steeped in academia tend to forget that many people have no idea what the subject they're teaching is and what the common complaints about it are. I certainly didn't when I started. And especially for non-majors, you can't expect them to learn it all by osmosis.

I would have more economic history and history of economic ideas, going back before Smith.

For instance,"free trade" originally had nothing to do with tariffs; it meant the absence of monopolies. (And when teaching about gains from trade, for goodness' sake emphasize loud and long that the (survey-course level) model doesn't tell you who gets the gains - that's a political problem.)

I would also spend much more time on imperfect competition and its effects than on theories assuming perfect competition. The world we know is built around imperfect competition.

Most importantly, there has to be lots of evidence for social-science ideas that seem counterintuitive. This is the only way to get over the abhorrence most people seem to feel on first contact with the ideas of economics.

Evidence, evidence about the evidence, evidence of the debates about the evidence and the ideas, evidence about times when the profession discarded ideas which it had long held, and why.

If survey-course students, are going to come away with anything useful they first and foremost have to leave with the feeling that they can trust the practitioners. There are too many stories -- too much evidence -- of economists ignoring evidence.

As someone who's actually taken this course I feel justified in making a comment...

One of the major concerns with the course is that your proposal, "He should assign students each to report on one theory or technique..." is literally impossible. Mankiw has almost no involvement with the teaching of the course. He lectures four or five times each semester to the ~700 students enrolled in the class, and the rest of the course is taught independently in ~25-student sections by teaching assistants.

Apart from any content concerns, this is a serious issue for many students.

While it was some years ago when I took Psychology 101, what struck me was how much they didn't know. Although it's gotten better, I'm sure there are still plenty of gaps. The difference, of course, is the instructor and textbook didn't act like they knew it all.

My two main grips about economists is arrogance that they know it all and that I rarely see one say that he/she doesn't have an answer.

I'm always amused when an economist is interviewed after they were wrong about something and they act like the reason for what did occur was obviously so-and-so. Well if it was so obvious, why didn't you see it in the first place?

Also, my shorthand test for many economic research papers is to ask, what if this was a sociology paper? Would they have been allowed to get away reaching the conclusions on what is often sparse or presumed data.

I don't have a problem with economists defending their theories when circumstances appear to prove them wrong, just don't do it in policy papers or congress. Sometimes I think the saying "Economics is too important to be left to economists" is right on the mark.

My point wasn't to hold up Sociology as the better discipline. It's just that when a Sociology paper of similar weak research is presented, it's often dismissed out of hand by those outside the discipline. Not so with Economics. Economic papers seem to be judged on a curve and given wide latitude in abstraction and data requirements to justify conclusions. Maybe it's the math and graphs.

I know I'm exaggerating for effect but I don't think I'm that far from the mark.

My two main grips about economists is arrogance that they know it all and that I rarely see one say that he/she doesn't have an answer.

Mankiw, for example, has openly stated how limited his understanding of the economy really is, despite years of study. Hayek and Keynes, more popular amongst the masses, have similarly expressed these views. Sims and Sargent have also made similar comments in one of their interviews after they were awarded the Nobels.Most of the arrogance is around 'pseudo-economists' and not actual researchers (ie think-tank reps., politicians, etc.)

It's just that when a Sociology paper of similar weak research is presented, it's often dismissed out of hand by those outside the discipline. Not so with Economics. Economic papers seem to be judged on a curve and given wide latitude in abstraction and data requirements to justify conclusions. Maybe it's the math and graphs.

Interesting, I've seen the exact opposite with sociology and most other social sciences. Economic research, just as sociological research, is often just cherry-picked to support the 'pickers' interest. Natural sciences are NOT excluded either from this bias, even when comes to something as concrete as physics or medicine.

I agree on the idea about "study science(like Astrophysics and Astronomy) so that you will not be unemployed" but we all know that this requires a lot of money and not all of us can support that kind of study. What if the person don't really want to study about science? Can you force him or her?